30-289 La.App. 2 Cir. 6/26/98, Farmers Cotton Co., Inc. v. Savage

• Decision Date: 26 June 1998
• Citation: 714 So.2d 926
• Parties: 30-289 La.App. 2 Cir
• Court: Court of Appeal of Louisiana — District of US

Page 926

714 So.2d 926

30-289 La.App. 2 Cir. 6/26/98

FARMERS COTTON COMPANY, INC., Plaintiff-Appellant, v. Ben SAVAGE, d/b/a Indian Lake Farms Partnership, Defendant-Appellee.

No. 30289-CA.

Court of Appeal of Louisiana, Second Circuit.

June 26, 1998.

Rehearing Denied Aug. 13, 1998.

Michael E. Kramer, Winnsboro, for Plaintiff-Appellant.

C. Calvin Adams, Jr., Tallulah, for Defendant-Appellee.

Before HIGHTOWER, BROWN, WILLIAMS, STEWART and GASKINS, JJ.

[30-289 La.App. 2 Cir. 1] STEWART, Judge.

Plaintiff, Farmer's Cotton Company, Inc., appeals the judgment of the district court vacating an arbitration award in its favor against defendant, Ben Savage d/b/a Indian Lake Farms Partnership. For the following reasons, we reverse and render judgment confirming the arbitration award in favor of Farmer's Cotton Company, Inc.

FACTS

Ben Savage leased acreage from Chicago Mill and Lumber Company and from Jim Thomas and Robert Harold. On February 9, 1995, Ben Savage entered into a contract with Farmer's Cotton Company, Inc., in which he agreed to sell, for a certain price, all cotton produced on 533 acres farmed by Savage. Several months later contract was amended, by a handwritten notation by an employee of Farmer's Cotton which was initialed by Savage, to indicate Ben Savage d/b/a Indian Lake Farms Partnership as "seller" under the contract.

By letter dated October 16, 1995, Michael Kramer, attorney for Farmer's Cotton, advised Savage that Farmer's Cotton would proceed to arbitration if Savage did not deliver the cotton as contracted. On November 10, 1995, Charles Chambers, Executive Director of the Memphis Cotton Exchange, appointed John T. Jordan as arbitrator pursuant to the contract.

Mr. Jordan notified Farmer's Cotton and Savage that an arbitration hearing would be held on February 16, 1996, in Winnsboro, Louisiana. After discovering that the contract had been amended to name Ben Savage d/b/a Indian Lake Farms Partnership as "seller," Mr. Jordan contacted Calvin Adams, attorney for Thomas and Harold, alleged partners of Indian Lake Farms, and notified him of the arbitration hearing. Prior to the February 16, 1996 hearing, the parties submitted statements to Mr. Jordan. Farmer's Cotton made an additional submission at that [30-289 La.App. 2 Cir. 2] hearing. Stella Beasley and Faye Montgomery, representatives of Farmer's Cotton, Bennie Roberson, a representative of Chicago Mill, and Kramer attended the February 16, 1996 arbitration hearing. Thomas appeared later in the day and was questioned by Mr. Jordan. A second hearing, on February 21, 1996, in Rayville, Louisiana, was held and was attended by Savage and Harold.

The submission by Savage, Harold and Thomas alleged (1) that, on February 13, 1995, Thomas and Harold leased acreage to Savage, (2) that Savage also leased acreage from Chicago Mill, (3) that Thomas and Harold formed Indian Lake Farms Partnership in April, 1995, to farm Savage's acreage, (4) that Savage informed Thomas and Harold that he had signed a contract with Farmer's Cotton, and (5) Savage was to notify Farmer's Cotton of the change in circumstances.

The submissions by Farmer's Cotton alleged (1) that Savage contacted and advised Farmer's Cotton in June, 1995, that he planted less cotton than originally intended, (2) that, approximately a month later, informed Farmer's Cotton that he was not farming as "Ben Savage" but as "Ben Savage d/b/a Indian Lake Farms Partnership," (3) that Savage initialed the amendment to the contract, (4) that Savage indicated to Farmer's Cotton that he approved the contract amendment at the advice of Harold and Thomas, and (5) Savage offered to repay 50% of the loss suffered by Farmer's Cotton.

On February 21, 1996, Mr. Jordan found that Ben Savage d/b/a Indian Lake Farms Partnership failed to fulfill the obligations pursuant to the contract, engaged in poor business practices, and caused a loss to Farmer's Cotton. Mr. Jordan awarded Farmer's Cotton a total amount of $28,144.08.

Farmer's Cotton filed a petition to confirm the arbitration award on April 3,1996. On May 7, 1996, Ben Savage answered and filed a reconventional demand seeking vacation or modification of the award based on the award being [30-289 La.App. 2 Cir. 3] procured by undue means, the evident partiality of the arbitrator, and the arbitrator's refusal to hear evidence "pertinent and material to the controversy." The answer alleged that Savage was not a partner of Indian Lake Farms and had no authority as a mandatary of Indian Lake Farms, that Indian Lake Farms did not submit to arbitration, and that the arbitrator's ruling is null and void against that entity.

On April 29, 1996, the trial court rendered judgment vacating the arbitration award and ordered rehearing by the arbitrator to determine the liability, if any, of Ben Savage to Farmer's Cotton. Farmer's Cotton appeals and assigns three errors: (1) the trial court erred in finding that Ben Savage was not a partner in Indian Lake Farms, (2) the trial court erred in allowing full trial on the merits and admitting new evidence which was available at the time of the arbitration hearing, and (3) the trial court erred in vacating the arbitration award.

DISCUSSION

We first address appellant's third assigned error that the trial court erred in vacating the arbitrator's award. Although arbitration law presupposes the validity of a contract, and jurisdiction for determining the validity of such contract is properly in the courts, the issue of the validity of the underlying contract is not properly raised either by a petition for confirmation of an arbitration award or by a reconventional demand seeking vacation or modification of an award. See George Engine Co. v. Southern Shipbuilding Corp., 350 So.2d 881 (La.1977); Ackel v. Ackel, 97-70 (La.App. 5th Cir. 5/28/97), 696 So.2d 140; Mt. Airy Refining Company v. Clark Acquisition, Inc., 470 So.2d 890 (La.App. 4th Cir.1985). Therefore, the sole issue to be resolved by this court is not whether the contract was valid but whether grounds for vacating the arbitration award were established by Savage.

[30-289 La.App. 2 Cir. 4] Arbitration is favored as a public policy in Louisiana. Spencer v. Hoffman, 392 So.2d 190 (La.App. 4th Cir.1980); Wright v. Round the Corner Restaurants of Louisiana, Inc., 252 So.2d 341 (La.App. 4th Cir.1971). Due to the strong public policy favoring arbitration, arbitration awards are presumed to be valid. National Tea Co. v. Richmond, 548 So.2d 930 (La.1989). An arbitrator's award is res judicata and must be affirmed unless grounds are established, in accordance with arbitration law, for the vacation, modification or correction of the award. Spencer v. Hoffman, supra.

La. R.S. 9:4201 provides, as follows:

A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

La. R.S. 9:4209 provides, as follows:

At any time within one year after the award is made any party to the arbitration may apply to the court in and for the parish within which the award was made for an order confirming the award and thereupon the court shall grant such an order unless the award is vacated, modified, or corrected as prescribed in R.S. 9:4210 and 9:4211. Notice in writing of the application shall be served upon the adverse party or his attorney five days before the hearing thereof.

This provision requires that a court confirm the arbitration award upon application by any party unless grounds pursuant to La. R.S. 9:4210 or 9:4211 exist. St. Tammany Manor, Inc. v. Spartan Building Corp., 509 So.2d 424 (La.1987).

La. R.S. 9:4210 enumerates specific grounds for vacating an arbitration award: (A) where the award was procured by corruption, fraud, or undue means; (B) where any of the arbitrators evidenced partiality or corruption; (C) where the arbitrators refused to postpone the hearing, upon sufficient cause shown, refused to hear evidence pertinent and material to the controversy, or are guilty of any other [30-289 La.App. 2 Cir. 5] misconduct prejudicial to the rights of any party; or (D) where the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. La. R.S. 9:4211 prescribes grounds for modification or correction of an award: (A) miscalculation of figures or incorrect description of any person, thing, or property in the award; (B) where an award is rendered upon matters not subject to arbitration; or (3) imperfect form of the award.

In the furtherance of the purpose and intention of arbitration, an award may be challenged only on the grounds specified in the statute. The reviewing court may not substitute its own judgment for that of the arbitrators. Firmin v. Garber, 353 So.2d 975 (La.1977); Hill v. Cloud, 26,391 (La.App. 2nd Cir. 1/25/95), 648 So.2d 1383; Greer v. Lowe, 94 So.2d 560 (La.App. 2d Cir.1957). A reviewing court cannot review the merits of an arbitrator's decision. National Building and Contracting Company, Inc. v. Lafourche Parish Police Jury, 381 So.2d 867 (La.App. 1 st Cir.1980), writ denied, 385 So.2d 268 (La.1980); Matter of Bacmonila Garden Apartment, Inc., 359 So.2d 1340 (La.App. 4th Cir.1978). The grounds for challenging an award do not include errors of law or fact. Errors of law or fact are insufficient to invalidate a fair and honest award. St. Tammany Manor, Inc. v. Spartan Building Corporation, 509 So.2d 424 (La.1987); Firmin v. Garber, supra; National Tea Co. v. Richmond, supra.

Although the presence of an arbitration clause in a contract does not divest the...